195 F. 669 | 8th Cir. | 1912
These writs of error challenge a judgment on the merits in favor of the defendants below, Hugo A. Koehler, Henry Koehler, Jr., and American Brewing Company, for their costs in an action at law brought against them by Guaranty Trust Company of New York upon a contract between them and that company dated June 14, 1905. The plaintiff below complains that a judgment was not rendered'against these defendants for $5,943.71, and the defendants that a judgment was not rendered against the plaintiff for $7,500 on their counterclaim. The parties by a written stipulation waived a jury, and agreed that the case should be referred to Hon. Jesse A. McDonald to hear the evidence, to make a special finding of the facts, to state his conclusions of law, and to report them to the court, that the court might approve or disapprove, or modify, the report, and might enter such a finding and judgment as it deemed proper, and that the finding of facts and conclusions of law when adopted by the court should be deemed the findings and conclusions of the court. The referee made a special finding of facts which was approved and adopted by the court. 11 e stated conclusions of law which led him to recommend a judgment against the defendants, both on the plaintiff’s cause of action and on the defendants’ counterclaim. The court disapproved some of the referee’s conclusions of law, and rendered a judgment for costs against the plaintiff. The result is that the special finding of facts made by the referee became the special finding of the court, and the writs of error present the question whether or not this finding warrants the judgment below, and, if not, wliat judgment it docs warrant.
The contract in suit was made on June 14, 1905, in Manila. The parties to it were the plaintiff on one side and on the other side the defendants, American Brewing Company, a corporation, Hugo A. Koehler, and Henry Koehler, Jr., all of St. Louis, Mo., hereafter called the local defendants, and William Wolff, under the name of William Wolff & Co., F. H. Hilbert, C. H. Hilbert, and Pacific Oriental Trading Company, a corporation, all of San Francisco, Cal. While all these defendants were parties to this action, none but the local defendants were served with process or appeared in the case. The agreement recited that the plaintiff had advanced $48,500, more or less, in connection with the property of the Philippine Lumber & Development Company, and it agreed to advance $14,000 more to enable the defendants to bid at a proposed sale of that property under an order of the Court of First Instance of Manila, and that, in com sideration of those advances, the defendants agreed that a mortgage should be given by those who acquired the property at the proposed purchase on all the assets they should get by virtue of the sale to secure the plaintiff for its advances made and to be made; that these advances should draw interest payable monthly at 7 per cent, per annum, and should be secured to the amount of $40,000 by a first mortgage on the property to be acquired and to the amount of $22,-500 principal, and the interest on the entire $62,500, by the joint and several guaranty of the defendants that the advances should be paid back at the rate of $3,750 on account of the $40,000 and $3,750 on account of the $22,500 annually, that the mortgage should be prepared by the solicitors of the plaintiff, and should be given when the necessary power of attorney arrived in Manila, and that the defendants should cause the plant, buildings, timber, and other property to be acquired to be kept insured by the owners for the security of the plaintiff. • The defendants made this contract, not for the pecuniary benefit of the prospective purchasers or others, but for their own benefit. The property of the Lumber Company was for sale for $62,500, and they believed that it was worth, and they were subsequently offered, $90,000 for it. The Lumber Company owed the Trading Company between $35,000 and $42,000. It owed Henry M. Jones $42,000 and he had indorsed its notes held by the Trading Company to the amount of $27,767. The Trading Company had made a general assignment for the benefit of its creditors to Paul Reiss, who was the agent and attorney of the local defendants in Manila, Clarence L. Mitchell, who was the agent in Manila of all the other defendants except the Trading Company, and H. B. C. Jones, who was an inactive assignee. The Trading Company owed the American Brewing Company $175,000. Henry Koehler, Jr., was the president and Hugo A. Koehler was the vice president, and each of them owned about one-third of the capital stock of the Brewing Company. The Trading Company owed William Wolff $170,000. He was one of its stockholders and an indorser;
Within 20 days after the contract was made, the plaintiff advanced the amount it agreed to put up, and with this money Reiss and Mitchell bought and took possession of the plant and property of the Lumber Company. They subsequently realized from that transaction $10,-000 which they used to operate the mill. They and their successory trustee operated the plant, made a mortgage on it to the plaintiff to secure the $40,000, and paid the monthly interest as it came due under the contract of June 14. 1905, for 13 months.
Between June 14, 1905, and July, 1907, the local defendants requested and secured, by means of promises to pay at later dates, several extensions of the time for the payment of the amounts which fell due in June, 1906. On January 12, 1907, they sent to the plaintiff $7,500 in answer to its demand for a payment of the amounts due under the guaranty, and wrote it a letter that the reason they had not sent this money before was that the Hilberts and Wolff would not pay their share on account of their losses in the San Francisco fire, and they asked the plaintiff to sue themselves, the Hilberts and Wolff jointly, to accept the $7,500 as a deposit as evidence of their good faith, and to so hold it until the writer could see the plaintiff in New York on the following Friday. They also wrote in that letter that their remittance did not include interest, that they were expecting a cable from Manila stating the exact sum due on that account, and that, when they ascertained the amount, they would cover it by draft immediately. In June, 1907, the plaintiff demanded payment of the additional installment and the interest which had become due, and in July, 1907. the local defendants denied all liability under their contract, and for the first time demanded the repayment of the $7,500, on the ground that the agreement of June 14, 1905, was not a contract of guaranty, and imposed no liability upon them.
The reasons now urged in support of the contention that the defendants are not liable under the contract are that the agreement was incomplete and the local defendants were never bound by it because Reiss had no authority to execute it on behalf of the Trading Corn-
But the contract recited that it was made by the Trading Company as well as by the other defendants. Reiss and Mitchell executed it on behalf of all these parties. They had authority to execute it for the other defendants, but none to do so for the Trading Company, and from these facts the referee and the court deduced the legal conclusion that the contract was incomplete, and none of the defendants were bound by it. There are many authorities to the effect that where a contract recites the names of parties lo be jointly, or jointly and severally, bound by it, and some of them have signed it and others have not, the contract is incomplete, and the former do not become liable under it. Wood v. Washburn, 2 Pick. (Mass.) 24; Russell v. Annable, 109 Mass. 72, 73, 12 Am. Rep. 665; Dole Bros. v. Cosmopolitan Preserving Co., 167 Mass. 481, 46 N. E. 105, 57 Am. St. Rep. 477; Fish v. Johnson, 16 La. Ann. 29; Arnold v. Scharbauer (C. C.) 116 Fed. 492; United States v. O'Neill (C. C.) 19 Fed. 567; Smith v. United States, 2 Wall. 219, 230, 17 L. Ed. 788; Sharp v. United States, 4 Watts (Pa.) 21, 23, 28 Am. Dec. 676 ; McDaniel v. Anderson, 19 S. C. 211; Barber v. Burrows, 51 Cal. 473, 474; Bean v. Parker, 17 Mass. 591, 604; Waggeman v. Bracken, 52 Ill. 468, 470; Andrews v. Etheridge, 9 Mass. *383; Johnston v. Kimball Township, 39 Mich. 187, 33 Am. Rep. 372; Board of Education of Rapid City v. Sweeney, 1 S. D. 642, 48 N. W. 302, 36 Am. St. Rep. 767; Cay v. Murphy, 134 Mo. 98, 34 S. W. 1091, 56 Am. St. Rep. 496; Martin v. Hornsby, 56 Minn. 187, 56 N. W. 751, 43 Am. St. Rep. 487; Bjoin v. Anglim, 97 Minn. 526, 107 N. W. 558; Weir v. Mead, 101 Cal. 125, 35 Pac. 567, 40 Am. St. Rep. 46; Goodyear Dental Vulcanite Co. v. Bacon, 151 Mass. 460, 24 N. E. 404, 8 L. R. A. 486; Wild Cat Branch v. Ball, 45 Ind. 213; Novak v. Pitlick. 120 Iowa, 286, 94 N. W. 916, 98 Am. St. Rep. 360. But the reason for these decisions is that those who sign do so in the faith and on the implied condition that the others whose names are recited in the agreement as obligors with them shall also sign and shall thereby diminish the ultimate liability of the actual signers, and that the absence of the signatures of some named in the contract is notice to the obligee that the contract is incomplete, and that no one is bound by it. In the case in hand the facts found demonstrate, however, that the defendants, other than the Trading Company, neither intended nor expected that that company should become an obligor with them, or that their liability would be diminished by its signature, for it was insolvent and they knew it. They had authorized Reiss and Mitchell to make the guaranty without the Trading Company. Reiss and Mitchell knew when they signed and delivered the agreement in Manila, and hence, by virtue of the law, their principals, the defendants other than the Trading Company, then knew that Reiss and Mitchell had no authority to execute it on behalf of the Trading Company, so that the case stood exactly as it would have been
The true rule and the conclusion is that the failure of some of the obligors named in the body of a contract of guaranty or of suretyship to execute' it, or their unauthorized execution of it, constitutes no defense to the liability of other obligors named therein who with knowledge that the former are not bound thereby execute and deliver the contract to the obligee, and thereby induce him to part with the consideration thereof. Smith v. United States, 2 Wall. 219, 229, 17 L. Ed. 788; Russell v. Freer, 56 N. Y. 67, 71; Adams v. Bean, 12 Mass. 137, 7 Am. Dec. 44; Empire State Surety Co. v. Carroll County (C. C. A.) 194 Fed. 593; United States Fidelity & Guaranty Co. v. Haggart, 91 C. C. A. 289, 297. 163 Fed. 801. 809; St. Louis Brewing Ass’n v. Hayes, 38 C. C. A. 449, 97 Fed. 859; State v. Bowman, 10 Ohio, 445 ; City of Deering v. Moore, 86 Me. 181, 29 Atl. 988, 41 Am. St. Rep. 534; Pima County v. Snyder, 5 Ariz. 45, 44 Pac. 297; Douglas County v. Bardon, 79 Wis. 641, 48 N. W. 969: Gibbs v. Johnson, 63 Mich. 671, 30 N. W. 343; Trustees of Schools v. Sheick, 119 Ill. 579, 8 N. E. 189, 192; Woodman v. Calkins, 13 Mont. 363, 34 Pac. 187, 40 Am. St. Rep. 449; United States Fidelity & Guaranty Co. v. Union Trust & S. Co., 142 Ala. 532, 38 South. 177; Lovejoy v. Isbell, 70 Conn. 557, 40 Atl. 531; Johnson v. Johnson, 31 Ohio St. 131; San Roman v. Watson, 54 Tex. 254. The contract was not void as against the defendants because the execution of it by the Trading Company was unauthorized.
But why was not the agreement a guaranty of payment? Counsel answer, because it provides that the amount of the advances of the plaintiff in excess of $40,000 to make the purchase “shall be secured, by the joint and several personal guaranty” of the defendants, and
From the time the contract was made on June 14, 1905, until it was finally repudiated by the local defendants in July, 1907, all the parties to it by their acts in performance of it, by their letters and telegrams and by their words regarding it, interpreted it to be an executed guaranty by the defendants and none of them ever suggested the contrary, or that a subsequent guaranty was contemplated. Under that construction the plaintiff advanced its money to Reiss and Mitchell, and they purchased the property. Reiss wrote defendant Koehler in June, 1905, “Your joint guaranty stands at $22,500, and Koehler re-, plied in the following July, “Should the concern in the near future produce any cash be sure to apply it on our guaranty.” The finding of facts discloses no less than 17 references in letters and cablegrams of some of the parties, or of their agent Reiss, to this contract as a guaranty, or to the debt to the plaintiff as guaranteed. On October 25, 1906, the defendant, Hugo A. Koehler, wrote to the vice president of the defendant thus:
« * * * what we desire is an extension of time of payment of the amount now due under this guaranty up to the first of January next. Should, on the first of January next, all plans with respect to the Philippine Lumber and Development Company have riot been consummated, we agree to pay with*679 ouí fnrttior delay that portion of tlie guaranty which is now due under the terms of the guaranty entered into in Manila for and on our behalf by Mr. Paul lieiss. * * ”
And the plaintiff granted the extension.
The next objection of the local defendants to the enforcement of this contract is that it was never performed by the plaintiff: (a) Because, as they say, the contract provided that the advances which constituted the consideration for the contract were to be made to the defendants and they were made to Reiss and Mitchell. But the contract does not provide that the advances should be made to the defendants personally. It recites that the plaintiff has already advanced $48,500, more or less, in connection with the property of the Philippine Dumber & Development Company, none of which had been advanced to or for the defendants, that it had agreed to extend its advances up to $62,500, and that it had yet to advance $2,500 to enable the defendants to make a bid at the proposed sale.. The defendants were in America, and Reiss and Mitchell, their agents, were in Manila. The extension of the advance was made at the request of Reiss and Mitchell and to them to enable them to bid at the sale in order that the main benefit of the purchase might flow to the defendants through these same agents as the assignees of the Trading Company and the trustees for its creditors. Reiss and Mitchell purchased and acquired the property by means of the plaintiff’s advance and devoted it to this purpose without personal title or interest in themselves, and the plaintiff’s advancement to them was in strict performance of the agreement, (b) Because the amount agreed to be advanced was the difference between $48,500 and $62,500 and the amount advanced was $62,500, $44,419.50 was paid out of this amount by the receiver of the Dumber Company, to whom it was paid for the purchase of the property, in order to satisfy the debt of the plaintiff secured upon the property, and $4,113.05 was paid to' the plaintiff by Reiss and Mitchell in satisfaction of the unsecured part of its prior advance of $48,500 recited in the contract, so that Reiss and Mitchell had as counsel for the defendants’ claim $4,113.05 less than the agreed amount with which to operate the plant they bought. But it was immaterial to the liability of the defendants whether the plaintiff advanced only $14,000 after the contract was made and retained its existing mortgage for $44,-419.50 or advanced the $62,500, received back the $44,419.50 secured upon the property from the receiver, satisfied its old mortgage, and took a new one for $40,000 on the plant. There is nothing in the contract to the effect that Reiss and Mitchell or the defendants should retain and use to operate the plant they purchased $4,113.05 out of
Finally, it is contended that the defendants were released from the obligation of their agreement: (1) Because Reiss in his letter to Marshall on June 14, 1905, agreed on behalf of the defendants that they would guarantee that all sums advanced by the plaintiff pending the arrival of a power of attorney should be repaid. But this letter was written on the same day as and before the guaranty in suit. Reiss had no authority to guarantee repayment of more than was advanced under this written guaranty. Xo more was advanced, and this letter itself provided that it should cease and be of no further effect, when the guaranties and agreements contemplated by the understanding between Reiss and Marshall were made and these guaranties were executed when the contract in suit was signed on that day. This letter did not modify the contract. (2) Because Reiss and Mitchell on behalf of their principals on June 30, 1905, made an agreement to pay, or to cause the receiver to pay, to the plaintiff $44,532.05, errors in the account excepted. But this agreement was not inconsistent with any terms of the contract in view of the fact that the plaintiff advanced the entire $62,500 to make the purchase. It was a mere stipulation of a part of the method of performing the contract which the/ agreement itself did not prescribe. It neither modified the guaranty nor released the defendants from their obligation to perform it.
All the propositions and arguments of counsel relating to the validity, construction, extent, and enforcement of the contract of June 14, 1905, have been deliberately considered, the more important of them
For the same reason, and also because the plaintiff had the same knowledge and the same means of knowledge as the defendants regarding the lack of the authority of Reiss and Mitchell to make the unauthorized guaranty, and because the facts found fail to show that The plaintiff disadvantageoiisly changed its position 'in reliance upon any acts or words of the defendants conceding the validity of that guaranty, the local defendants are not estopped from repudiating it, and the plaintiff cannot recover interest on the $40,000.
The sum of the whole matter is that the defendants, Hugo A. Koeh